From the Ground Up - Obstacles to Expansion of the U.S. Beef Herd

Beef cattle prices have been high for the past five years, but so have input costs like corn and diesel, and when input costs are high, beef operations are less profitable, and that causes producers to cut back.

Add to that the most severe drought in Texas history last year, along with a drought this year in the U.S. corn belt, and the result is a continued decline in beef cattle numbers.

“I like to talk about it in terms of beef cows because that’s the productive part of the industry. Those are the cows that have the calves that go to a feed lot that become a steak.”

David Anderson is a livestock economist with Texas Agrilife Extension.

“We shrink the size of the cow herd, we lose producers. It’s not everybody sitting around together, and deciding we’ll all cut back a little bit. It’s people who go out of business. Will some of them come back? Some will come back. Some will expand.”

But Anderson says there are several barriers beef producers have to overcome to get back in the market or expand.

“One might be age. One can also be has your pasture and range recovered enough that you can even put cows on there, because that takes time. There’s some financial aspects, you know, how much money did people spend buying feed to keep the cows through the drought. They’ve got to build up a financial wealth before they can do that again, and then the cost to buy back in, that financial hurdle, because nationwide, we’ve got fewer animals, we’ve downsized. Prices are very high.”

The drought in the midwest and great plains has spiked corn prices and caused beef producers in that part of the country liquidate their herds.

“Corn prices go up, feeder prices go down, that’s exactly what’s happened, so the combination of no place for them to go except the feed lot, and record high feed costs have taken the bottom out of this market, and we’ve dropped more than twenty percent in the calf market.”

Because of the high prices, even more corn will be planted next year, and if there’s not another drought in the Midwest next year, corn prices should come down.

“The problem is we’ve got to get from now, to the next harvest season. If you have the grass, if you can hold your cows, do that, because I think we’re looking at higher calf prices in the future.”

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